Whenever I have media interviews with Chief Executive Officers (CEOs), one of the questions I always ask is what gives them sleepless nights. They always have an answer. It could be a crisis, a newly introduced industry regulation, competition, talent retention, cash-flow, succession planning, financing… the list is long.
The Africa Business Agenda shows that CEOs in Africa are optimistic about the prospects for revenue growth over the next 12 months. CEOs in Ghana (94 per cent), South Africa (90 per cent), Zimbabwe (90 per cent) and Rwanda (87 per cent) are the most optimistic. CEOs in Kenya (83 per cent), Tanzania (70 per cent), Uganda (67 per cent) and Zambia (65 per cent) are ‘somewhat or very’ confident of growth. However, there are six agendas they cited as important and a major concern in the coming months.
The main thing that cuts across the Africa Business Agenda is agility, a factor that will allow companies in Africa to realise their full potential. “Agility in response to change, challenge and opportunity is the deciding factor between companies that thrive in Africa and those that are merely doing business,” says Anne Eriksson, Regional Senior Partner PwC East Africa.
1. The agility agenda
Agility means not only understanding current market dynamics, but also understanding the ability to anticipate change in customer preferences and economies that will drive growth. Depending on the market a company is operating in, the priority list for CEOs in Africa varies from focusing on: developing new products, service delivery, organic growth in their existing domestic market or foreign markets, to giving priority to new business relationships like mergers and acquisitions, joint ventures or strategic alliances.
Forty six per cent of CEOs in the survey say they are concerned about shifts in consumer spending and behaviour. The twin drivers of economic and demographic growth are leading to rapid increases in consumer expenditure, and emerging market growth (at 43.4 per cent) is forecast to be three times that of developed markets between 2013 and 2020. Organic growth as an agility agenda is also keeping CEOs awake at night. Eighty five per cent of CEOs in Africa say they expect their operations in Africa to grow in 2014, with the with only 43 per cent saying they are concerned about new market entrants.
Apart from external factors, CEOs are also concerned about making their organisations more agile. Most anticipate changing their company’s strategy over the next 12 months – Kenya (71 per cent), South Africa (77 per cent) and Angola (100 per cent). They mention operational effectiveness as the second-most important investment priority. A major investment towards making organisations agile will be technology – which will be critical to achieving other priorities like growing customer base, improving operational efficiency and enhancing customer service.
2 .The growth agenda
Yes, CEOs are optimistic about growth. But what is their game plan? Whether eyeing a move to a neighbouring country or to an emerging market on the other side of the globe, the decision to expand beyond one’s core markets is never easy. Every potential gain in revenue or market share has a corresponding risk of failed product launches or underestimation of the competition. For companies looking for rapid, sustainable growth, even the decision of where to expand has become more complicated.
The top two investment priorities CEOs say, will be growing customer base and enhancing service. CEOs in Africa will be putting emphasis on new product development in order to anticipate and meet the changing needs of customers.
3. Infrastructure development
Infrastructure is a critical enabler of economic growth. At the same time, lack of infrastructure undermines productivity, raises production and transaction costs and hinders growth of businesses as well as the ability of governments to pursue economic and social development policies. Many CEOs in Africa say that inadequate infrastructure is a threat to growth.
With the exception of countries like Rwanda, Congo-Brazzaville, Angola, Kenya and Cote d’Ivoire, most CEOs in Africa do not believe that governments are doing enough to improve infrastructure.
Thirty two per cent of CEOs around the world have similar sentiments. “The biggest issue that we have that really worries me is the lack of infrastructure. Without infrastructure, no one will come to your country to invest,” says Aliko Dangote, President and CEO, Dangote Group, Nigeria.
4. The risk agenda
“The fast-changing African marketplace is causing many companies to initiate business transformation programmes to better position themselves and also allow a clearer strategy regarding risk appetite, risk attitudes and approaches, while considering investing or operating on the continent,” says Anton van Wyk, PwC Risk Assurance Leader, Central and Southern Africa. At least half of all CEOs in every country surveyed are concerned about the threat uncertain or volatile growth poses to their businesses. The average level of concern in Africa is still slightly lower than the global average. In the survey, CEOs in Africa are split between those who say that risk management is centralised (54 per cent) and those who say it is decentralised (44 per cent) in their organisations. Majority say they dedicate more risk management resources to predicting high-impact events (56 per cent) and 41 per cent say they dedicate respires to recovering from risk events should they occur.
CEOs rated bribery and corruption as a threat to growth and it consistently ranks among their top three risks. “
5. The development agenda
CEOs were asked about a range of stakeholders and how much they influence strategy. They said the three most influential stakeholder groups are customers, government and competitors. Over 80 per cent of CEOs said others who influence their strategy are: supply chain partners, capital providers, employees and local communities. CEOs listed several risks to the development agenda like: economic volatility, bribery and corruption, inflation, government debt, exchange rate volatility, increasing tax burden, inadequate infrastructure and major social unrest. When CEOs were asked what areas they will be investing in to advance the development agenda, their priorities were somewhat different and ranged from building a skilled workforce, supporting workforce health and reducing poverty and inequality. “Business, particularly big business, is a vital component in alleviating poverty as it can generate large numbers of jobs quickly, when it invests capital into industry,” says Marcel von Aulock, CEO Tsogo Sun South Africa.
6. The leadership agenda
Businesses world over are struggling with a widening mismatch between the skills of their workforce and the talent they need to achieve strong growth. CEOs are concerned about the availability of key skills. The survey shows that nowhere is the shortage of skills more acute than in many fast-growing markets in Africa where creating and fostering a skilled workforce is highly regarded by 84 per cent of the CEOs. “Skills shortages is one of the major problems that we face in Africa. Having comparative advantage is no longer enough. You need a superior talent pool,” says Dangote. The Dangote group has set up a ‘Dangote Academy’ specifically to build the technical and vocational skills of graduates, enhancing their career prospects and employability.